Oil boom towns lead U.S. job growth

States experiencing hydrocarbon booms are expected to return to pre-2008 crisis employment levels faster than non-oil producing American states, according to an IHS Global Insight forecast.

Energy producers North Dakota and Alaska gained back all the jobs during the 2008 recession by mid-2010, and Texas — the hub of the U.S. oil and gas sector — is expected to reclaim all job losses by the first quarter of 2012, says the IHS forecast.

“Indeed, it is a true story that Texas and North Dakota are leading job creation due to their natural resources and commodity development,” Jim Difley, analyst with IHS told the Financial Post. “Sun Belt states such as Florida, Nevada and Arizona are at the exact opposite of the U.S. economy growth trajectory after leading Post-Second World War growth, due to depressed real estate in those states.”

North Dakota has seen its oil production more than triple in five years to 113,000 barrels per day in July 2011 from 34,000 in July 2006.

The U.S. Department of Labour statistics show that North Dakota led the largest over-the-year percentage increase, rising 4.5%, followed by Wyoming 3% and Oklahoma 2.8% — all three states are among the major energy producers in the United States.

North Dakota and Alaska led tax collection increases from July to September, with revenue more than doubling because of “taxes driven by higher oil and mineral prices,” the Nelson A. Rockefeller Institute of Government said Dec. 8.

Since 2005, oil production in North Dakota has nearly quadrupled at the same time employment in mining, quarrying, and oil and gas extraction has increased 185%, IHS said.

What’s more, energy-producing regions are seeing “significant wage gains,” said Drew Matus, senior U.S. economist at UBS Securities LLC. “Go to North Dakota and try to rent a hotel room for the night. Good luck, right? You cannot do it.”

Interestingly, the largest over-the-year percentage decreases in employment occurred in Delaware -0.8% and Georgia -0.5% — two states that have small or negligible hydrocarbon production.

Clearly, there are other factors at work as well. Nebraska and South Dakota — neither of which are major energy producers in the U.S. — are expected to return to peak employment rates by the 3rd quarter and fourth quarter of 2012, respectively.

But the overall trend does suggest that hydrocarbon producers have an advantage: West Virginia (Q1, 2013), Louisiana (Q2, 2013), Pennsylvania (Q3, 2013) and Oklahoma (Q2, 2013), are all expected to return to peak employment faster than other states.

Meanwhile, a full employment recovery in minor or non-energy producing states such Nevada, Rhodes Islands, Michigan and Connecticut will not come before 2016-017 period, IHS forecast.

DIGGING DEEP

Much of the boom has been credited to a rise in activity in liquids-rich plays such as the Eagle Ford Shale, Marcellus Shale, and the Bakken formation in the past three years, accounting for 27% of U.S. Natural gas production in 2010 – within the next five years that figure is expected to jump to 43%.

While shale gas has transformed the economies of many states in a short space of time, it is not without its critics. Hydraulic fracturing, which use chemicals to unlock gas and oil from shale, remains an unpopular method among environmentalists, who claim it could lead to water contamination and even earthquakes.

A recent EPA draft report on a gas field in Wyoming suggested that hydraulic fracturing – or fracking – could be a likely reason for water contamination in the area. Encana, the Canadian company managing the development, has methodically shred the report’s credibility to pieces, but it’s unclear what the PR damage may be to the industry.

While question marks hover over the environmental impact of fracking, the employment benefits are clear.

A separate IHS Global Insight report estimates that the shale gas industry contributed over 600,000 jobs in 2010. By 2015 that figure will increase 45% to almost 870,000 jobs; by 2035, that figure will nearly triple to 1.66 million jobs.

“With an annual rate of jobs growth of 7.7%, this five-year period will see the most rapid expansion of jobs, as significant investments in shale gas are infused into the economy,” says the HIS.

More significantly, these are not temporary jobs that would dissipate once the projects are complete. The distribution of employment in 2010 and 25 years later are expected to be stable.

With US$1.9-trillion expected to be invested in shale gas development in the U.S. through to 2035, hiring levels in mining, construction and manufacturing are expected to remain stable during the next 25 years.

“In turn, those direct investments and jobs help sustain indirect and induced manufacturing and services jobs, as well as jobs in retail and wholesale trade,” says the IHS report. “The fact that only 10-12% of the jobs will be in the mining sector (where gas extraction jobs are categorized) illustrates that the economic contribution of shale gas industry extends far beyond the mining sector.”

The IHS forecast expects governments to generate US$57-billion in revenues by 2035 from US$19-billion in 2010 – cumulatively that could amount to US$933-billion in federal, state and local government tax revenues and federal royalty payments over the next 25 years.

Shale gas’s contribution to GDP was more than US$76-billion in 2010, a figure that’s set to rise to US$118-billion by 2015 and will triple to US$231-billion in 2035, the report predicts.

Almost Done!

Postmedia wants to improve your reading experience as well as share the best deals and promotions from our advertisers with you. The information below will be used to optimize the content and make ads across the network more relevant to you. You can always change the information you share with us by editing your profile.

By clicking "Create Account", I hearby grant permission to Postmedia to use my account information to create my account.

I also accept and agree to be bound by Postmedia's Terms and Conditions with respect to my use of the Site and I have read and understand Postmedia's Privacy Statement. I consent to the collection, use, maintenance, and disclosure of my information in accordance with the Postmedia's Privacy Policy.

Postmedia wants to improve your reading experience as well as share the best deals and promotions from our advertisers with you. The information below will be used to optimize the content and make ads across the network more relevant to you. You can always change the information you share with us by editing your profile.

By clicking "Create Account", I hearby grant permission to Postmedia to use my account information to create my account.

I also accept and agree to be bound by Postmedia's Terms and Conditions with respect to my use of the Site and I have read and understand Postmedia's Privacy Statement. I consent to the collection, use, maintenance, and disclosure of my information in accordance with the Postmedia's Privacy Policy.